HeyTea Official: We Are Now Open to Franchising! A Great Value Opportunity!

Heytea Opens the Door to Franchising

On November 3, media reported that Heytea would open franchising. The news came shortly after the brand closed the last store of its sub-brand Heyxia Tea, and now it is following up by opening the franchise door.

According to Heytea's latest announcement, the partnership fee for its business franchise will be under 500,000 RMB. That is not far from the 350,000-400,000 RMB starting investment of other brands in the industry. Unlike the large stores Heytea opened before, this time it stresses "appropriate store formats" in the information it has confirmed publicly, and franchised stores will mainly be under 50 square meters.

Recruitment sites show Heytea has already posted a role called "Heytea - Business Partnership Management Manager," responsible for connecting and following up on investment promotion and client management, tracking the pace of partner store openings, and supporting business partners. The qualifications clearly require more than three years of experience managing franchises for well-known chain brands.

Multiple media outlets have now confirmed with Heytea that it is indeed preparing to open franchising. To let more customers enjoy its products faster and experience their quality, Heytea says it will draw on the experience, capabilities, and resources built over the past decade to launch business partnership operations in non-first-tier cities with appropriate store formats, building on having rolled out the store partnership mechanism across all its stores nationwide. It will support business partners in branding, products, quality control, food safety, operations, training, and supply chain.

Marketing expert Tang Li put it bluntly: "Heytea has not received new funding for a long time and failed to list on the Hong Kong stock market as hoped this year. Opening franchising not only opens up lower-tier markets for Heytea but also eases its financial burden."

Heytea's Development History

Public information shows Heytea originated in Jiangmen, Guangdong, opening in 2012 under the name ROYALTEA. Unable to register the trademark, it was fully upgraded to the registered brand HEYTEA in February 2016 and entered the Beijing market in August 2017. It has always run on a directly managed model, insisting on real milk, real fruit, real tea, and real sugar to make quality products that are not expensive. It now has more than 800 stores in nearly 70 cities worldwide, with cities such as Shanghai and Shenzhen each home to over one hundred.

In the new tea beverage industry, apart from Heytea, brands such as Nayuki and ChaYanYueSe have also stuck with direct management. Compared with franchising, direct management does run more smoothly, but store counts mostly stay in the hundreds, while brands built mainly on franchising generally top a thousand. According to MIXUE's earlier prospectus, MIXUE has over 20,000 stores, Guming over 6,600, Shuyi Xiancao over 6,500, and ChaBaiDao over 5,800.

Market Strategy and Outlook

In recent years the new tea market's push into lower-tier cities has become more and more obvious. Perhaps to capture third- and fourth-tier markets, Heytea has been busy: price adjustments, collaborations, transparent windows for real fruit peeling, the "Axi" full-body call-out contest, closing the affordable sub-brand Heyxia Tea, and now opening franchising. After the franchise door opens, will the new tea industry enter another round of fierce competition?

In early February, Heytea announced it had completed a comprehensive price adjustment, and stores in many regions saw overwhelming orders. By June this year, products priced under 19 RMB made up 80% of Heytea's menu. At the same time, the brand rolled out collaborations with IPs including Hiroshi Fujiwara, "A Dream of Splendor," "Genshin Impact," and "The Legend of Zhen Huan," steadily building brand momentum.

Heytea's collaboration with the hit drama "A Dream of Splendor" sold nearly 300,000 cups on the first day, with the best single store selling around 1,000 cups. Its tie-in with "The Legend of Zhen Huan" sold out the moment it launched. As the first new tea brand to collaborate with the hugely popular TV drama "The Legend of Zhen Huan," the partnership once sparked a wave of creativity among netizens and created a strong point of brand differentiation.

According to Heytea's own data, store expansion has slowed noticeably in recent years. In 2018 the count was 163; in 2019 it was 390, a growth rate of 139%; in 2020 another 320 stores were added, a growth rate of 78%; in 2021 the number of new stores was 202, a growth rate of only 26.3%, a year-on-year decline in store growth.

Is Heytea opening franchising now to quickly capture lower-tier markets? The problems and challenges of those markets should not be underestimated. Whether Heytea can break through there with the franchise model remains to be verified by the market. That said, Heytea has opened the franchise door. Will Nayuki, another standard-bearer of direct management in the new tea industry, be far behind?

Image source: Internet

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